Spain and renewable energy

Official Name: Kingdom of Spain.

Summary: After historically relying on coal for its energy generation, Spain has significantly diversified its supply mix and is a global leader in renewable energy deployment.

In 19th-century Spain, energy generation relied heavily on coal consumption to meet its growing energy needs, although this dependence varied by region. In 1860, the country’s total coal consumption was less than 1 million tons, but that number grew to approximately 5 million tons by 1900. Half of this consumption is derived from imported coal. The poor quality of Spanish coal, coupled with its inaccessibility, significant extraction and transport costs, and the country’s reliance on imported supplies, contributed to the high overall cost of energy and possibly the country’s slow economic transformation.

Hydropower and petroleum entered the energy supply mix in the early 20th century, but their addition could not prevent the electricity shortages of the 1940s and 1950s, which were a common feature of both rural and urban Spanish life. These shortages inhibited economic growth by halting manufacturing for weeks or months at a time. Over the next two decades, Spain continued to work on diversifying its energy supply. It increased its petroleum consumption, which rose 13.1 percent annually between 1960 and 1973, but had to import 98 percent of this supply. Petroleum easily became the country’s major source of energy, and between 1973 and 1979, it accounted for two-thirds of the country’s primary energy requirements. During this period, nuclear power was also introduced, starting in 1964 with the construction of the José Cabrera Nuclear Power Station (or Zorita). This was the first of three turnkey nuclear power reactors. In the early 1970s, construction started on a second generation of seven reactors, although only five were completed. Finally, natural gas was brought to the country via tanker from Algeria, and the first regasification plant was built in 1971.

The country sought to address its energy challenges by formulating its first official energy policy in 1975 as the National Energy Plan (Plan Energetico Nacional, or PEN). However, its recommendations were largely ignored until a second PEN was approved in 1978. The industry’s reorganization resulted in the creation in 1981 of the National Institute for Hydrocarbons (Instituto Nacional de Hidrocarburos, or INH), which directed the state petroleum monopoly, Compania Arrendataria del Monopolio de Petroleos (CAMPSA), and parts of the oil, gas, and petrochemical industry. The government sought to increase the efficiency of the coal-mining sector by closing down high-cost mines and providing financial aid for the industry’s modernization. An emphasis was placed on a greater role for nuclear power in meeting the country’s increasing generation needs.

PEN was revised again in 1983 to rationalize energy consumption and reduce Spain’s dependence on imported energy. In addition, it pressed for a reorganization of the oil industry and a financial reorganization of the electricity industry. In contrast to the previous PEN, it reduced the role of nuclear energy by postponing the opening of a nuclear plant and mothballing three others. As part of the effort to reduce dependence on imported oil, natural gas consumption was encouraged. As such, the consumption of natural gas increased faster than that of any other fuel, doubling between 1973 and 1984. Domestic production began in 1984, and in 1987, natural gas supplied about one-sixth of the country’s overall natural gas consumption. Domestic production shortfalls were taken up by imports from Algeria and Libya under long-term contracts. In 1988, it was agreed that Spain’s gradually expanding gas pipeline network would be connected to the European network.

By the mid-1980s, INH was responsible for more than 1 percent of the Spanish gross domestic product (GDP) and claimed 20,000 employees. To prepare for Spain’s entry into the European Community (EC), after which state monopolies were required to be phased out, all of INH’s holdings—with the exception of the state gas company, Empresa Nacional del Gas—were placed under a new holding company in the late 1980s. The company, Repsol, which had a stock market listing, was gradually allowing a greater role for private capital in the petroleum industry. By 1988, Repsol had become Western Europe’s seventh-largest petroleum company and would eventually merge with a former Argentine company in 1999 to become Repsol-YPF, one of the world’s largest integrated oil operators. EC membership rendered CAMPSA’s future uncertain because it would no longer be allowed to have a distribution monopoly. The EC stipulated that specific amounts of nine groups of petroleum products from foreign suppliers would have access to the Spanish market.

Spurred by its 1986 membership in the European Community, Spain experienced a period of rapid industrialization. In 1997, the 1998–2005 Plan for the Future of Coal Mining was negotiated and signed by the government and trade unions. The plan provided for the progressive reduction of public aid to the industry, a gradual reduction in production, the regeneration of mining areas, and a reduction in employment.

Production and Consumption

In the early twenty-first century, Spain was the fifth-largest greenhouse gas (GHG) emitter in the European Union (EU), accounting for about 8 percent of total emissions. Spain increased emissions by 42 percent between 1990 and 2008, largely because of increases from road transport, electricity and heat production, and manufacturing industries. However, the country was a significant contributor to the EU’s 75.7-million-ton GHG emission decrease from 2007 to 2008 because of a strong decline in coal use for power generation. In 2021, with coal accounting for only 3.2 percent of the country's energy mix, Spain was responsible for just 0.6 percent of global CO₂ emissions from combustible fuels.

Spain also has the fifth-largest electricity market in the EU. As of 2022, the country produced 291.3 terawatt-hours of electricity, exceeding the level of demand of 244.6 terawatt-hours. In 2022, electricity exports were 27.916 billion kilowatt-hours, whereas imports were 8.043 billion kilowatt-hours. Coal and nuclear remain the main fuels, but the contributions of gas and renewable sources are quite high and have grown steadily in the twenty-first century. In 2022, all renewable sources together accounted for 45.5 percent of the nation's electricity generation.

A significant share of Spain’s electricity generation continues to come from conventional thermal plants. Spain’s conventional thermal-generating capacity contributes more than half of the country’s total power supply. Over time, conventional thermal generating capacity has begun to shift from an emphasis on coal toward natural gas in order to increase existing generating capacity and reduce its GHG emissions. Natural gas accounted for 24 percent of Spain’s total energy supply in 2022. Among renewables, wind power became the leading generation source in the mid-2010s, accounting for 22 percent of total installed capacity in 2022, followed by solar at 11.8 percent.

Despite major advancements in domestic renewables, Spain still depends heavily on energy imports, and controversial nuclear energy remains critical to domestic production. Oil and natural gas are also important in Spain’s primary energy supply. Natural gas is imported via international pipelines, including the Trans-Pyrenean, linking to Norway via France; the Magreb-Europe, connecting to Morocco; and the Medgaz, from Algeria.

Several incumbent generators and distributors dominate the Spanish generation and supply markets. Empresa Nacional de Electricidad, S.A. (Endesa) is the largest generating and distributing company in Spain, with more than 21,000 megawatts of installed generating capacity. Endesa is a subsidiary of the Italian utility company Enel.

Coal

Historically, Spain relied on imports for the bulk of its energy needs. Until recent years, coal represented about 18 percent of the nation’s energy consumption, with domestic coal supplying about half of the nation’s coal demand. Overall coal consumption remained relatively flat during the 1990s and early 2000s, until a decline at the end of the first decade of the 21st century. In 2021, coal represented only about 0.8 percent of Spain's energy consumption. Still, coal remains a plentiful domestic energy source, with proven reserves estimated at 1.187 billion metric tons in 2022.

Government-owned companies produce most of the coal in Spain. The single largest company is Empresa Nacional Hulleras del Norte, S.A. (HUNOSA), which was founded in 1967 to direct most of Spain’s coal mining and eventually amalgamated the country’s larger coal companies.

Renewable Energy

A significant share of Spain’s electricity is generated by renewable sources, and in 2022, this generation will supply approximately 42.5 percent of the country’s electricity. Wind and hydropower made up the majority of that production. Hydropower produced approximately 18.5 percent of total renewable electricity production in 2022 and is an important element in providing storage capacity via pump-hydro technology. Wind power’s share of overall energy generation was about 52.5 percent in 2022. On very windy days, wind power can peak at more than half the national power consumption. Some autonomous regions in the country, such as Castile, León, and Galicia, lead Europe in the use of renewable energy technology.

The country is a global leader in renewable energy deployment, particularly in wind and solar power. Wind accounted for 22 percent of Spain's total installed electricity generation capacity in 2022, with solar following at 11.8 percent, hydropower at 5.6 percent, and biomass and waste at 2.8 percent. Some of the largest EU solar PV and thermal power plants are located in Spain.

Spain’s renewable energy industry has been the beneficiary of government support programs introduced in 1997 through the Electric Power Act and periodic revisions via royal decrees. The country’s policies included one of the world’s most aggressive Feed-in Tariff (FIT) programs, low-interest loans and direct financial support, fuel tax exemptions applied to biofuels, and supportive enabling legislation, such as a new technical buildings code obliging new buildings and renovations to meet between 30 and 70 percent of domestic hot water demand with solar thermal energy.

In response to the global economic crisis of 2008–09 and the rapid installation of PV capacity, the Spanish government had to enact significant cutbacks in its solar FITs and apply an annual capacity cap. This sharply reduced investment in the sector from an installed generating capacity of 2,700 megawatts in 2008 to only 100 megawatts in 2009 and 2010. However, the industry recovered significantly. In the 2020s, Spain set its sights on achieving national climate neutrality, a 100 percent renewable energy electricity mix, and 97 percent renewable energy in the total energy mix by 2050. To reach this goal, the government focused on continuing to develop the country's renewable energy resources, increasing energy efficiency, and improving electrification.

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